ACIT, Madurai V. M/s. M.S.P.Raja & Co., Madurai

ITA 1171/CHNY/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6544 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 16-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SRINIVASAN
• Assessee Lawyers: G BASKAR
• Keywords: Bonafide belief; Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B CHENNAI BEFORE SHRI U.B. BEDI, J.M. AND SHRI N.S. SAINI, AM .. I.T.A. NO. 1171/MDS/2010 ASSESSMENT YEARS 2004-05 THE A. C.I.T CIRCLE II MADURAI VS. M/S M.S.P. RAJA & CO 259, WEST MASI STREET MADURAI (PAN NO. AABFM 2671 G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G. BASKAR DEPARTMENT BY : SHRI B. SRINIVASAN O R D E R PER N.S. SAINI, A.M :- THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER PASSED BY THE LD. CIT(A)-I, CHENNAI DATED 16.04.2010 FOR ASSESSMENT YEAR 2004-05. PAGE 2 OF 6 I.T.A. NO. 1171/MDS/2010 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT T HE COMMISSIONER OF INCOME-TAX [APPEALS] ERRED IN DELETING THE PENALTY OF ` . 18,33,600/- U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961 [IN SHORT, THE ACT]. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON REC ORD. IN THE INSTANT CASE, PENALTY U/S 271(1)(C) OF THE ACT WAS LEVIED B Y THE ASSESSING OFFICER AT ` . 18,33,600/- IN RELATION TO DISALLOWANCE OF CLAIM OF DEDUCTION OF ` 20 LAKHS BY THE ASSESSING OFFICER. 4. ON APPEAL, THE LD. CIT(A) DELETED THE LEVY OF PEN ALTY BY OBSERVING AS UNDER: REGARDING THE ADDITION OF ` 20 LAKHS ON THE STOCK ISSUE, THE AUTHORIZED REPRESENTATIVE CONTENDED THAT ` 10 LAKHS WAS OFFERED TOWARDS STOCK FOR ASSESSMENT YEAR 2002-03 AND ` 20 LAKHS WAS OFFERED FOR ASSESSMENT YEAR 2003-04 AT THE TIME OF SURVEY. AS THE ASSESSEE WAS UNDER THE IMPRESSION THAT STOCK OFFER O F ` 10 LAKHS WILL GO TO INCREASE THE CLOSING STOCK AS ON 31.3.20 02 BY ` . 10 LAKHS. FOR ASSESSMENT YEAR 2003-04, ` 20 LAKHS WAS OFFERED TOWARDS STOCK BUT THE OFFER OF ` 10 LAKHS WAS WILL BECOME OPENING STOCK FOR ASSESSMENT YEAR 2003-04 AND THEREBY REDUCE THE OFFER OF INCOME OF ASSESSMENT YEAR 2003-04 BY ` 10 LAKHS. THE ASSESSING OFFICER DID NOT ALLOW SUCH ADJUSTMENT AND IT WAS CONFIRMED BY THE LD. PAGE 3 OF 6 I.T.A. NO. 1171/MDS/2010 CIT(A) AND THE TRIBUNAL SUBSEQUENTLY. PERUSAL OF RETURN F ILED FOR ASSESSMENT YEAR 2004-05 REVEALED THAT STOCK OFFER O F ` . 20,00,000/- FOR ASSESSMENT YEAR 2003-04 WAS CLAIMED AS DEDUCTION IN THE COMPUTATION OF TOTAL INCOME BY TAKING A CONSI STENT STAND. THE DETAILS ARE AVAILABLE IN THE RETURN ITSELF AND T HERE WAS NO INVESTIGATION OR CONCEALMENT UNEARTHED BY THE ASSESS ING OFFICER. THE ASSESSING OFFICER MERELY FOLLOWED HIS ORDER OF ASSESSMENT AND THE ORDER OF THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2003-04. A WRONG CLAIM BY ITSELF DOES NOT WARRANT PENALTY IF T HE FACTS RELATING TO THE SAME ARE DISCLOSED. THE ASSESSEE W AS OF THE OPINION THAT HIS OFFER OF INCOME AT THE TIME OF SURV EY WAS TOWARDS STOCK AND BELIEVED THAT HE IS ENTITLED FOR SET OFF FOR ASSESSMENT YEAR 2003-04 FOR THE OFFER IN ASSESSMENT YEAR 2002- 03. SIMILARLY HE IS ENTITLED FOR SET OFF FOR ASSESSMENT YEAR 2004 -05 FOR THE OFFER IN ASSESSMENT YEAR 2003-04. THEREFORE, THE ASSESSE E WAS UNDER THE BONAFIDE BELIEF THAT HE IS ENTITLED FOR THE CLA IM. AS RIGHTLY POINTED OUT BY THE APPELLANT, NO PENALTY FOR CONCEA LMENT HAD BEEN LEVIED FOR THE ASSESSMENT YEAR 2003-04. IN THE CIRCUMSTANCES, PENALTY U/S 271(1)(C) OF THE ACT IS NO T EXIGIBLE FRO THE STOCK ISSUE. RELIANCE IS PLACED ON THE DECISIO N OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPR ODUCTS P. LTD 2010 322 ITR 158. THEREFORE, PENALTY IS NOT LEVIAB LE SIMPLY BECAUSE ADDITIONS ARE CONFIRMED. IN THE RESULT, PENAL TY LEVIED AT ` 18,33,600/- U/S 271(1)(C) OF THE ACT IS HEREBY DELET ED. 5. BEFORE US, THE LD. D.R. RELIED ON THE ORDER OF TH E ASSESSING OFFICER AND SUBMITTED THAT DISALLOWANCE OF CLAIM FOR DEDUCT ION OF ` . 20 LAKHS PAGE 4 OF 6 I.T.A. NO. 1171/MDS/2010 WAS CONFIRMED BY THE TRIBUNAL. IT WAS EXPLAINED THAT DURING THE COURSE OF SURVEY ON 26.7.2002, THE ASSESSEE DISCLOSED ADDI TIONAL INCOME OF ` 10 LAKHS FOR ASSESSMENT YEAR 2002-03 AND ` 20 LAKHS FOR ASSESSMENT YEAR 2003-04. THE ASSESSEE DISCLOSED THE ABOVE INCOME IN ITS RETURN OF INCOME FILED FOR RESPECTIVE ASSESSMENT YEARS. HOWE VER, THE ASSESSEE CLAIMED DEDUCTION OF ` 10 LAKHS IN THE ASSESSMENT OF ASSESSMENT YEAR 2003-04 WHICH WAS DISCLOSED BY HIM FOR ASSESSMENT Y EAR 2002-03. SIMILARLY, ASSESSEE CLAIMED DEDUCTION OF ` 20 LAKHS IN THE ASSESSMENT YEAR 2004-05 WHICH WAS DISCLOSED BY HIM AS ADDITION AL INCOME FOR ASSESSMENT YEAR 2003-04. THE LD. D.R. FURTHER POIN TED OUT THAT THE TRIBUNAL IN ITS ORDER FOR ASSESSMENT YEAR 2003-04 U PHELD THE DISALLOWANCE OF ` 10 LAKHS BY FINDING THAT INCOME OF ` 10 LAKHS DISCLOSED FOR ASSESSMENT YEAR 2002-03 WAS NOT ON ACCOUNT OF S TOCK BUT WAS ON ACCOUNT OF SUPPRESSION OF SALES AND THE SAME WAS UT ILIZED FOR MAKING UNRECORDED EXPENDITURE. HE POINTED OUT THAT THE TRI BUNAL IN THE ASSESSMENT YEAR 2004-05 BY FOLLOWING THE ORDER IN ASSESSMENT YEAR 2003-04 CONFIRMED THE ADDITION OF ` 20 LAKHS AND THEREFORE, THE ASSESSING OFFICER WAS JUSTIFIED IN LEVYING PENALTY U/S 271(1) (C) OF THE ACT ON THE ADDITION OF ` 20 LAKHS. PAGE 5 OF 6 I.T.A. NO. 1171/MDS/2010 6. ON THE OTHER HAND, THE LD. A.R. SUPPORTED THE OR DER OF THE LD. CIT(A) AND POINTED OUT FROM THE ASSESSMENT ORDER OF ASSESSMENT YEAR 2003-04 PLACED AT PAGES 4 TO 7 OF THE PAPER BOO WHER EIN THE ASSESSING OFFICER HAS RECORDED AS UNDER: AFTER THE SURVEY, THE ASSESSEE HAS FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003-04 ON 20.11.2003 ADMITTING THE TOTAL INCOME AT ` 12,20,550/-. THIS INCLUDED A SUM OF ` 20 LAKHS BEING ADDITIONAL STOCK OFFERED BY THE ASSESSEE FIRM BEFOR E THE DEPUTY DIRECTOR OF INCOME-TAX [INV], MADURAI. 7. WE FIND THAT THE REVENUE HAS BROUGHT NO MATERIA L BEFORE US TO SHOW THAT THE DISCLOSURE OF ` 20 LAKHS WAS NOT ON ACCOUNT OF STOCK AS STATED BY THE ASSESSING OFFICER IN THE ASSESSMENT O RDER OF ASSESSMENT YEAR 2003-04. COPY OF STATEMENT RECORDED DURING COU RSE OF SURVEY WAS NOT PRODUCED BEFORE US. FURTHER, THE FINDING OF TH E LD. CIT(A) THAT SIMILAR DISALLOWANCE OF ` 10 LAKHS WAS MADE IN THE ASSESSMENT YEAR 2003- 04 BUT NO PENALTY U/S 271(1)(C) OF THE ACT WAS LEVI ED FOR THAT YEAR WAS NOT DISPUTED BY THE REVENUE BEFORE US. THE REVENUE COULD NOT CITE ANY JUST REASON FOR ITS NOT IMPOSING PENALTY FOR ASSESS MENT YEAR 2003-04 AND IMPOSING PENALTY FOR ASSESSMENT YEAR 2004-05 ON THE ALLEGED SIMILAR FACTS. IN THE ABOVE CIRCUMSTANCES, WE DO NOT FIND A NY ERROR IN THE ORDER PAGE 6 OF 6 I.T.A. NO. 1171/MDS/2010 OF THE LD. CIT(A) IN DELETING THE PENALTY IMPOSED BY THE ASSESSING OFFICER. THEREFORE, THE GROUND OF APPEAL RAISED BY THE REVEN UE IS DISMISSED. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE COURT ON27TH MAY 2011. SD/- SD/- (U.B.S BEDI ) (N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 27 TH MAY, 2011. VL/- COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE